The Impacts and Challenges of Electronic Commerce on Taxation

Abstract

This paper seeks to discuss the impact and challenges for tax authorities toward electronic commerce (e-commerce) activities. The discussions also highlight the draft issued by OECD in regards to tax challenge of the digital economy. The rapid growth of e-commerce adds value to company in term of cost saving since the customer can be reached all over the world without having physical presence in the customer’s country. This will give a positive relationship with the government tax revenue whereby increase in profit of the company will increase in tax revenue collection. However, there are some impact and challenges for tax authorities to deal with particularly related to tax evasion by the taxpayer because e-commerce seems as the new way for taxpayer to avoid tax payment. The borderless of e-commerce produce specific administration issues on identification of business, determination of the extent of activities, information collection and verification and identification of customers.